Final working paper, submitted to Office of Data Policy, Federal Energy Administration in connection with A Study of information systems to provide leading indicators of energy sufficiency, (FEA Contract no. 14-01-001-2040).

Prepared in association with Center for International Studies, Massachusetts Institute of Technology; Grant #E(49-18)-2295, Task Order No.2, from the Energy Research and Development Administration

This report examines the issues associated with government programs proposed for the "commercialization" of new energy technologies; these programs are intended to hasten the pace at which target technologies are adopted by the private sector. The "commercial demonstration" is the principal tool used in these programs. Most previous government interventions in support of technological change have focussed on R&D and left to the private sector the decision as to adoption for commercial utilization; thus there is relatively little in the way of analysis or experience which bears direct application. The analysis is divided into four sections. First, the role of R,D&D within the structure of the national energy goals and policies is examined. The issue or "prices versus gaps" is described as a crucial difference of viewpoint concerning the role of the government in the future of the energy system. Second, the process of technological change as it occurs with respect to energy technologies is then examined for possible sources of misaligment or social and private incentives. The process is described as a series of investments. Third, correction of these sources of misalignment then becomes the goal of commercial demonstration programs as this goal and the means for attaining it are explored. Government-supported commercialization may be viewed as a subsidy to the introduction stage of the process; the circumstances under which such subsidies are likely to affect the success of the subsequent diffusion stage are addressed. The discussion then turns to the political...